Category: Risks

Fraud Risk

Another type of risk which you need to be aware of as a forex trader is fraud risk.  In the early days of on-line trading fraud was more rampant in the forex industry.  In recent times, there have been significant improvements in weeding out unscrupulous brokers.  In an attempt...
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Devaluation Risk

What is devaluation or devaluation risk?  Devaluation takes place when a country deliberately adjusts its country’s currency downward relative to another country’s currency.   Devaluation is a monetary policy tool utilized by countries that have a fixed rate of exchange.  Devaluation is determined by the government which issues the currency...
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Broker Risk

Prior to handing over your capital, you want to make sure you do your homework and find a reputable forex broker.  Broker risk, can impact you and your working capital in numerous ways.  Some forex brokers are not regulated and unfortunately some do not have you best interest in mind. ...
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Operational Risk

Another form of risk associated with forex trading is operational risk.  Operational risk takes place when internal processes, systems and people are involved.  In addition, operational risk can be include legal risks, fraud and security.  Operational risk and management usually go hand in hand.  When a broker, for example,...
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Credit Risk

When trading the financial markets, your expectation should be that the person or institution on the other side of the trade will make good if the trade goes your way.  Credit risk is the risk where one party to a trade is unable to pay the other party.  This...
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Volatility Risk

Volatility plays a significant role in accessing foreign exchange risk.  Volatility risk describes the degree of fluctuations within the markets and should certainly be included in a trader’s thought process.  Although many forex traders generally look at volatility in terms of being a negative uncertain risk element, there are...
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Interest Rate Risk

Another major component of Forex risk is interest rate fluctuations.  We know that when an entity or institution borrows funds from a given lender, the lender will provide those funds in exchange for a given interest rate on the loan. The rate of interest charged will typically be determined...
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Political Risk

Political and economic risk can play a significant role in how you trade within the spot forex market.  Elections are taking place constantly throughout the world.  Economic and political factors can alter the investment landscape within a specific country, which can generate risk for forex traders.  During elections there can...
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Margin Risk

Margin or leverage risk can play a significant role in forex trading.  What exactly is margin trading?  Margin trading allows you to utilize leverage.  Usually, when you are placing a forex trade, it is necessary for you to put up only a portion of the total value of the position as...
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Diversify Your Forex Portfolio

A classic, tried and tested risk management rule is to not put all your eggs in one basket, so to speak, and Forex is no exception. By having a diverse range of investments, you protect yourself in case one market drops, the drop will hopefully be compensated for by...
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